Correlation Between New Residential and Caledonia Investments
Can any of the company-specific risk be diversified away by investing in both New Residential and Caledonia Investments at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining New Residential and Caledonia Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and Caledonia Investments, you can compare the effects of market volatilities on New Residential and Caledonia Investments and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in New Residential with a short position of Caledonia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Caledonia Investments.
Diversification Opportunities for New Residential and Caledonia Investments
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and Caledonia is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Caledonia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Investments and New Residential is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on New Residential Investment are associated (or correlated) with Caledonia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Investments has no effect on the direction of New Residential i.e., New Residential and Caledonia Investments go up and down completely randomly.
Pair Corralation between New Residential and Caledonia Investments
Assuming the 90 days trading horizon New Residential Investment is expected to generate 1.92 times more return on investment than Caledonia Investments. However, New Residential is 1.92 times more volatile than Caledonia Investments. It trades about 0.04 of its potential returns per unit of risk. Caledonia Investments is currently generating about 0.01 per unit of risk. If you would invest 736.00 in New Residential Investment on October 11, 2024 and sell it today you would earn a total of 356.00 from holding New Residential Investment or generate 48.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
New Residential Investment vs. Caledonia Investments
Performance |
| Timeline |
| New Residential Inve |
| Caledonia Investments |
New Residential and Caledonia Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Caledonia Investments
The main advantage of trading using opposite New Residential and Caledonia Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Caledonia Investments can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Caledonia Investments will offset losses from the drop in Caledonia Investments' long position.| New Residential vs. Walmart | New Residential vs. BYD Co | New Residential vs. Volkswagen AG | New Residential vs. Volkswagen AG Non Vtg |
| Caledonia Investments vs. Chrysalis Investments | Caledonia Investments vs. Tavistock Investments Plc | Caledonia Investments vs. Cairo Communication SpA | Caledonia Investments vs. New Residential Investment |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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